What Happens to Your Assets When You Leave Canada?

By Investors Group /
September 2018

Moving away? Here’s what you need to know about your assets, taxes and residency status.

It’s the opportunity of a lifetime: a chance to live and work somewhere exotic for a few years, or maybe forever. The family is all packed and ready to go, practising their hellos and thank yous in a new language. Your visas are all in order, but what about your Canadian paperwork? Will you have to keep filing taxes here? What about your investments, including your registered ones like your Registered Retirement Savings Plan (RRSP)?

Depending on your residence status and tax treaties, you could be taxed in Canada and the same income taxed again in your new country. Plan ahead.

Blaise Foulston, Investors Group Director of Tax and Estate Planning, explains what Canadians need to know — and do — before they head abroad for a new job and become expats for a few years, or even a few decades.

When I move away from Canada, I no longer have to worry about being taxed in Canada, right?

Wrong. If it is determined that you are a resident of Canada for income tax purposes, you are required to file a Canadian tax return and report your worldwide income on your personal Canadian return. If the Canada Revenue Agency (CRA) determines that you are a non-resident of Canada, you do not need to file a tax return if your only Canadian-source income is investment income, but you will have to pay a withholding tax on the Canadian-source income.

Depending on your residency status and any applicable tax treaties, you could be taxed in Canada and have the same income taxed again in your new country. Plan ahead to be certain of your residency status and any foreign tax credits available by consulting a cross-border tax specialist.

How would I be considered a non-resident of Canada for tax purposes?

Generally, the CRA will consider you a non-resident of Canada for income tax purposes if you leave Canada to live in another country and sever your residential ties with Canada – you have sold your home in Canada and taken up permanent residence in another country, your spouse, common-law partner and dependents leave Canada and you have broken your social ties, such as professional and community memberships.

If you leave Canada but keep a primary and/or secondary residence in Canada, have personal property such as a car, maintain a Canadian driver’s licence, passport and health insurance and Canadian bank accounts or credit cards, you may be considered a factual resident of Canada for tax purposes.

Consult with your professional tax advisor for further guidance.

What happens to my Canadian assets when I leave the country permanently?

When you leave Canada and sever your residential ties to Canada, you must file a final departure tax return. Let’s say you will be leaving Canada on November 1st. On that day, you will cease to be a resident of Canada and will be deemed to have disposed of all your non-registered investment assets at their fair market value. This is known as a deemed disposition and you will have to report the capital gains or losses that result from it.

RRSPs, tax free savings accounts (TFSAs), registered education savings plans (RESPs) and your principal residence are not subject to this deemed disposition but be aware of the tax consequences in your new country. For example, if you move from Canada to the United States, your TFSA will become taxable by the IRS.

After leaving Canada, you are still subject to tax in Canada on any Canadian-source income such as Canadian employment income, income from carrying on a business in Canada or from the sale of any taxable Canadian property. Withholding tax generally applies on your Canadian-source pensions and investment income.

Can I maintain my Canadian tax residency while working abroad?

Yes, if you spend more than 183 days in Canada in a given calendar year, or if you have sufficient Canadian residential ties such as a home, a spouse or common-law partner or dependents in Canada.

Can I get Canadian pensions and health coverage as an expat?

The Canada Pension Plan or Quebec Pension Plan retirement benefits you have generated through contributions will be paid to you even if you no longer live in Canada or pay taxes here. Other government benefits such as the Guaranteed Income Supplement, Spousal Allowance, Employment Insurance, and the Child Tax Benefit are subject to cancellation depending on the amount of time you are out of the country.

Your healthcare coverage is determined by your home province. In Ontario, you must reside in the province for 153 days each year to maintain coverage. However, you can reacquire coverage when you return to your home province but there is usually a waiting period.